76% jump in China property sales in 2009

Source : Business Times – 20 Jan 2010

7.8% price rise in Dec, fastest in 18 months; govt trying to curb speculation

China property sales jumped 75.5 per cent to 4.4 trillion yuan (S$894 billion) last year, led by the eastern cities of Zhejiang and Shanghai, as record new loans boosted buying.

The sales data released yesterday follows last week’s announcement that December property prices rose 7.8 per cent, the fastest pace in 18 months, adding urgency to government efforts to rein in speculation.

China this month reimposed a sales tax on homes sold within five years of their purchase while the country’s Cabinet on Jan 10 urged strict application of a 40 per cent downpayment requirement for second homes.

The measures are likely to weigh on first-quarter sales, economist Lu Ting said. ‘We will see very bad transaction numbers, even though prices may not fall that much as the supply of new homes is still low,’ Mr Lu, a Hong Kong-based economist at Bank of America-Merrill Lynch, said by phone yesterday.

Yesterday’s data more accurately reflects last year’s gain in asset values, he said. By floor area, sales rose 42 per cent from 2008 to 937 million square metres, the National Bureau of Statistics said in a statement on its website yesterday.

That compares with a 53 per cent gain between January and November, when sales value advanced 86.8 per cent. December’s declining sales growth reflects the seasonally slow winter period, Mr Lu said.

The December figure for property prices probably understated the size of the increase, the economist said. ‘In reality, the inflation in asset prices may be between 20 and 30 per cent, and that is way too high for the policymakers,’ Mr Lu said.

Zhejiang topped the increase in sales value, with a 130 per cent gain, the statistics bureau said yesterday. In Shanghai, the gain was 126 per cent.

Investment in property development in 2009 rose 16.1 per cent to 3.62 trillion yuan, the statistics bureau said. That was less than the 17.8 per cent gain in the first 11 months. Chinese banks extended a record 9.59 trillion yuan of new loans last year.

To counter property speculation, China is tightening lending. From Monday, Chinese banks raised the share of deposits they must set aside as reserves, as the government seeks to rein in liquidity from record lending without stalling a recovery. China is targeting 8 per cent growth this year, Industry Minister Li Yizhong said on Dec 21.

Shanghai Shimao Co, the local unit of billionaire Xu Rongmao’s developer Shimao Holdings Holdings Ltd, said yesterday that 2009 profit may quadruple, partly due to higher sales from additional commercial property projects.

Earlier this month, some of China’s biggest developers said 2009 sales increased significantly.

China Overseas Land & Investment Ltd, owned by the country’s construction ministry, said property sales rose 80 per cent to HK$47.8 billion (S$8.6 billion). Evergrande Real Estate Group Ltd, China’s third-biggest developer by market value, said on Jan 5 that contracted sales jumped fivefold to 30.3 billion yuan.

Meanwhile, investor Jim Rogers said Shanghai and Hong Kong property prices may fall after being driven higher by speculative demand, while the rest of the Chinese economy is ‘hardly in a bubble’.

Attempts by China’s government to restrain lending may ease speculation and accelerating inflation, Mr Rogers said in an interview with Bloomberg’s Singapore bureau yesterday.

Hong Kong’s real estate prices rallied the most among the world’s major housing markets last year, according to property adviser Knight Frank LLP, adding to signs that the city’s home values have risen too much.

‘Certainly, Shanghai real estate or Hong Kong real estate should decline,’ Mr Rogers said. ‘My goodness, if anything’s in a bubble in the world, that and US government bonds are certainly very overpriced.’

‘China now realises that they’ve created too much money, that prices are going up too much and they’re trying to slow things down,’ Mr Rogers said. ‘These things are designed to take some of the heat out of the economy. Let’s hope it works.’

Investor Mark Mobius said on Jan 7 the bubble in China’s property market isn’t about to burst. ‘The Chinese will act rationally and they’re not going to kill the market,’ Mr Mobius, who oversees US$34 billion of developing-nation assets at Templeton Asset Management Ltd, said in an interview in Singapore. ‘There’s still a lot of savings in China. Prices are high but I don’t see a crash.’

Mr Rogers, chairman of Singapore-based Rogers Holdings, also said that he hasn’t sold any of his Chinese stocks even after last year’s rally. He reiterated that the last time he purchased stocks in the country was between October and November 2008.

Still, the rally in global stock markets means a ‘consolidation is overdue’, he said. Commodities are a ‘much better place to be’ than stocks, he added.